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Monday, September 23, 2013

Can Censof bring back the good Time? (Star)

... Can Censof be the one to make Time compelling again to investors?

Certainly not to what it used to be since its prized telecommunication assets were bundled in the listing of Time dotCom, Time still has an asset or two which is desirable, deemed enough to entice as many as 10 interested parties for Khazanah’s 45% stake in it.

“Our selling point to Khazanah was that we can bring entrepreneurship and leadership into Time,” says an obviously pleased Datuk Samsul Husin who is Censof’s group managing director.

Despite its past failings and tribulations, he says Time is a “good” company.

“What they are lacking is basically entrepreneurship and leadership.

“I’ve been interested in Time for at least three years… and formally put in a bid as soon as Khazanah made the call,” he tells StarBizWeek.

Censof is essentially a financial management solutions provider. It was listed two years ago on Bursa Malaysia and has been steadily getting contracts since its establishment in the 1990s.

For the fiscal year ended Dec 31, 2012 Censof made a net profit of RM9.3mil on revenue of RM44.5mil compared to a net profit of RM8.8mil on revenue of RM43.4mil a year earlier

Highly dependant on government contracts, it counts over 100 key government-related agencies and ministries among its clients.

Among such clients are the Social Security Organisation (Socso), the Inland Revenue Board (IRB) and the Finance Ministry.

“We are a government business company and intend to keep it that way,” says Samsul.

The firm’s involvement as a financial management solutions provider to the Government and its agencies goes as far back as the mid-1990s coinciding with the Government’s plan to standardise the accounting software used across its agencies then.

Combined with Time’s over 30,000 clients which employ its services of e-commerce, cyber security and integrated intelligent infrastructure, Censof will immediately gain access to an enlarged client base.

At the centre of Time, is its majority-owned Dagang Net Technologies Sdn Bhd which has a concession agreement with the Customs Department for trade facilitation information technology (IT) services.

These services essentially involves facilitating documentation between the Government and business community such as exporters and importers, for trade purposes.

This concession is huge for Time as it currently contributes about 70% to its earnings, according to Samsul.

However, it’s due to expire in a year’s time but Samsul appears totally unaffected by this.

“As far as I know, we don’t have a real competitor that can do this, the barriers to entry for this are high.”

“Even if the concession is not renewed, we are confident that the clients will still use Dagang Net as they are used to it.”

Apart from an extended client base and access to Time’s product base, margins are another thing Censof hopes to gain from its purchase of the company.

“We can bundle whatever solutions that we both have and synergise, bringing down the costs in the process and increasing our margins.”

Currently, Censof’s average margin is 25%. The plan is to increase this to 30%, banking on increased efficiency from the combined group.

Turning Time around

“I believe we can do something with Time or else we would not have taken the risk to buy the company.”

The risk Samsul’s talking about involves the RM100mil worth of redeemable convertible notes that the company issued a few months ago, some of which will be used to finance this deal. That amount of debt is huge for a company of Censof’s size as its market capitalisation is around RM170mil.

“This has raised our gearing. Our profit will probably be lower this year because of the huge costs involved in this acquisition, but after that we are expecting it to grow some 30%.”

On its own, Censof has submitted bids amounting to “a few hundred” million ringgit worth of contracts.

Currently, its order book stands at about RM50mil which will last for a couple of years, says Samsul.

One of Censof’s advantages is that it owns the intellectual property of its solutions.

This makes it fuss-free for the company to market its solutions overseas, including in countries like the United States and Australia, although foreign sales make up less than 10% of total earnings.

As for Time, sources say the company could be in for a sizeable contract in relation to the provision of Goods and Services Tax or GST software services nationwide.

The project, of course, depends on if and when the Government goes ahead to implement GST.

Samsul does not comment on this but says this remains a “potential” for Time.

“It already has the data centre and infrastructure for such a project, we can source many other clients... there is huge potential everywhere”

“Buying into Time is part of our vision to be a bigger company.

“This is a big step but we have calculated the risk,” he says.

This is Censof’t third and largest acquisition to date.

Obviously, there is a detailed plan to make Time a more compelling company for investors.

“But I can’t say anything in detail for now – what I can say is that Time’s numbers will be better moving forward.”

Two ships for now

What he will say is that first on Censof’s agenda is to elect its own directors to the board of Time.

A new chief executive officer will then be chosen, and Samsul will likely be that person. “But that would depend on the decision of the board and will be done later,” he says.

He says he wants Censof’s “performance-based” culture to be slowly ingrained at Time.

“Right now, we want to be seen as two ships, so I don’t see any culture clashes or anything like that.”

But in the future, the companies may merge, he says.

“Because we are two ships now, where we can cooperate, we will.”

The companies have about 250 staff members each.

“I haven’t gone in to see the Time people, we have six months to complete everything including a mandatory general offer, subject to approval from the authorities.”

The plan is to keep Time listed after this is done.

Time shares were last traded at 27.5 sen while Censof finished yesterday at 46.5 sen.

“We hope shareholders of Time will stay with us, ride with us for the next few years and see what happens.”

“We do believe that now is the right time for Time to forget its history and move on.”